Foreign Institutional Investors infuse $436 Million in India’s Commercial Real Estate

Hyderabad: Institutional investments in the real estate sector witnessed an annual growth of 41 per cent in Q3 2024, reaching $0.96 billion. However, it sharply declined from $3.1 billion record investments received in the previous quarter. Despite this significant quarterly decline of 69 per cent, the outlook remains positive as investment nearly touches a billion mark.

The significant uptick in investments compared to the previous year is a testament to India’s robust economic growth amid prevailing geopolitical challenges. As a result, the share of foreign investors increased from 27 per cent in Q3 2023 to 46 per cent in Q3 2024. Conversely, the share of domestic investors declined to 43 per cent in Q3 2024 from 71 per cent in the same quarter a year earlier. However, the decrease was only 15 per cent in terms of value.

Shrinivas Rao, FRICS, CEO, Vestian said, “Investors have shown confidence in India’s growth story on the back of robust GDP growth. As a result, the real estate sector witnessed increased participation from foreign investors which led to institutional investments touching a billion mark in Q3 2024. Additionally, domestic investors are also actively participating, supported by the rapid infrastructure development across the country.”

Residential assets were the first preference for domestic investors during Q3 2024 whereas foreign investors accounted for 64 per cent of the commercial deals. Growing prominence of work-from-office mandates and GCCs (global capability centres) lured foreign investors, leading to an increase in the share of commercial investments from 24 per cent in Q3 2023 to 71 per cent in Q3 2024. On the other hand, the share of residential sector reduced to 19 per cent in Q3 2024 from 44 per cent in the same period a year earlier. However, investment in residential assets is expected to grow in the coming quarters as niche asset classes such as co-living, senior housing, and serviced apartments are gaining traction.

Furthermore, Chennai received the highest investments during Q3 2024 with 48 per cent share. Majority of investments in the city were concentrated in industrial & warehousing, commercial, and residential sectors.

Moreover, proptech platforms have also garnered traction with 22 per cent share of total investments recorded during Q3 2024. The share is likely to inflate further with the extensive use of artificial intelligence and machine learning in the real estate sector.